Applying for loans online can be easy or extremely frustrating if you don’t go about it in the right way. You want to get the best possible loan, but you don’t want to go through a complicated process or get involved in a scam.
Luckily, it is possible to get great loans online. Nonetheless, before you apply for a loan online, you need to understand precisely what you need so you can narrow your search. Otherwise, you’ll be overwhelmed with inappropriate options.
Let’s start by looking at what makes an online loan different and the various forms one can take.
What is an Online Loan?
Some people are concerned that online loans may not be as good as what they can get from an in-person lender. That’s not the case.
The major difference is that when you apply online you handle part or all of the loan process yourself, rather than dealing face-to-face with a person. It’s not better or worse; it’s just different. You choose whether this style of lending aligns with your values.
Fortunately, borrowing online provides more choice since you’re not restricted to local banks, credit unions, and other financial institutions. However, you need to do some basic homework to ensure an online lender is legit. It’s not complicated or time-consuming, but totally worthwhile before you apply for loans online.
Understanding Loan Types
Loans come in four basic forms – unsecured, secured, fixed rate, and variable rate. Each has its own risk level and impact on your credit. You can find loans online and in-person.
Unsecured Loans
When you’re looking for a loan for general purposes, these are the most common. They aren’t backed by an asset such as your home or vehicle, so the lender usually wants to see either a good credit score or a steady, recurring income.
You have many options when it comes to unsecured loans. If you go about the application process properly, you can shop around for the best possible loan available to you without worrying about your credit.
Secured Loans
Secured loans are backed by physical property such as real estate, stocks, jewelry, a vehicle, or other assets. Since the lender can seize the asset if you don’t repay your loan, it is lower risk for the lender. Consequently, they usually offer lower interest rates. However, you also risk your property.
Fixed-Rate Loans
Fixed rate loans have interest rates that remain the same throughout the repayment term. Loan payments are also consistent, making it much easier to budget.
Variable Rate Loans
The interest rate on a variable loan fluctuates when the prime rate rises or falls beyond a benchmark set by the lender. Consequently, these loans are much riskier for the borrower and fluctuations make it impossible to predict your payment amount throughout the repayment term.
Loans to Apply For Online
Now that you understand the basic loan types, you may be wondering how to apply for a loan online, but not so fast. You’ll need a bit more information, since there are also many loan options available to you. Each is meant for a specific need and each has its own terms and conditions. These are some of the most common:
Personal Loans
When you are looking to apply for a loan online, most likely it is a personal installment loan that you want. This loan option can be used for almost any expense including car or home repairs, emergency expenses, moving costs, medical expenses, and more. You usually don’t need to back the loan with collateral either.
If you’re approved for a personal loan, the lender sends you a lump sum of money. Your interest rate is usually fixed as are your payments. Consequently, it is easy to know when you pay and how much.
Qualifying for a personal loan may depend on your credit score. Nonetheless, you can often obtain a bad credit installment loan if you earn a steady recurring income. The lender decides which types of income they’ll accept, so check before you apply if you earn your money through means other than regular employment.
Fortunately, it can be very simple to apply for a loan online, when you choose the right lender.
Payday Loans
Payday loans are another loan option available to you online. They’re meant for short-term urgent needs, but can also be very costly.
Luckily, you can often apply for a personal installment loan instead, even if you only need a small amount of money. As a rule, an installment loan has lower interest rates and more time to repay.
Auto Loans
Auto loans are a form of a secured personal loan. Your loan is backed by your vehicle and the lender can repossess the asset if you don’t meet your loan obligations.
The major difference between an auto loan and a regular installment loan is that the lender only finances the balance after you pay a deposit. Interest rates and repayment terms vary greatly between lenders, but those with higher credit scores enjoy the best rates.
Credit Builder Loans
A credit builder loan is another form of a personal loan, but it may be handled in a different manner. Instead of sending you a lump sum of money, some lenders holds the funds in a savings account. Once you’ve fully repaid their loan, the lender releases the money.
Luckily, some lenders offer credit builder loans that operate much like any other installment loan. The lender reports your payments to the credit reporting agencies, but provides you with a lump sum. Most people can easily qualify, providing they have a steady recurring income.
Consolidation Loans
Consolidation loans are also personal installment loans. They allow you to borrow a lump sum of money to pay off multiple debts. The idea is to get a loan with a lower interest rate so you pay less. Of course, paying a single payment also makes your finances much simpler.
Finding the Right Online Loan
A personal loan is the most common loan option. It is flexible and suitable for many needs. Now it is just a matter of finding a lender that offers what you want.
How Much Do You Need?
Definitely sit down and figure exactly how much you need to borrow. This prevents you from taking on more debt than necessary.
Search for your chosen loan by specific terms. If you live in Missouri, search online installment loans in Missouri. Should you only want to borrow a small amount, search ‘small online personal loans in Missouri’. If you don’t narrow the field, you will get far too many results.
Review Your Finances
Review your income and expenses to determine what you can afford. Lenders usually ask you to list your debts, so check your debt-to-income ratio beforehand. Yours should be under 43%, but the lower the better. Otherwise, lenders may not be willing to grant you a loan.
Check Your Credit
Even if a lender emphasizes your income during the approval process, they may also do a soft inquiry on your credit too. Any errors on your reports can lead to lower credit scores than you deserve.
Luckily, you can obtain free copies of your credit reports from all three agencies through Annual Credit Report.com. Correct any errors, then apply for a loan.
Short List Lenders
After doing your searches, you’ve probably come up with a few potential lenders. Now it’s time to choose the one that offers precisely what you need.
Before you apply for a loan online, find answers to the questions that could affect you. This can help you eliminate inappropriate lenders so you can pinpoint the best one.
- Do they have a minimum credit score requirement? If you have less than perfect credit, you could be disqualified automatically.
- Do they have a minimum income requirement? Some lenders only welcome high-income applicants.
- Is the lender licensed in your state? This is a must-have if you want to avoid scammers.
- What fees do they charge? Some lenders charge an origination fee for setting up your account and pre-payment penalties if you want to pay extra.
- Are they asking for an upfront fee or guaranteeing approval? If so, it’s probably a scam.
- How easy is the application process? The lender should offer a simple form and quick response.
- Do you need to upload paperwork? Many lenders want to see pay stubs, tax documents, or other documents.
- Do they offer pre-approval? You should be able to compare the lender with others without impacting your credit score.
- What forms of income do they accept? Some lenders consider employment, self-employment, disability, and pensions.
- How quickly do they release funds? Some lenders take hours while others take days.
- How long to you have to repay? Payday loans must be repaid in weeks, while installment loans may offer months or years.
- What do clients say about them? They should have positive testimonials on their website and good online reviews.
Apply for Your Chosen Loan Online
Check rates and availability by getting pre-approval through several lenders. Choose the lender with the options that suit your needs and your life. It’s that simple.
Bottom Line
If you’re concerned about how applying for a loan impacts credit score, don’t worry. FlexMoney offers a fast, simple online loan process that does not impact your credit score.
Our personal installment loans in Missouri can provide up to $2,000, with 12-months to repay. FlexMoney welcomes applications from new borrowers, students, and those looking for a credit building loan.
If you would like to know more, please compare the advantages of online vs. in person loans here. We think you’ll quickly see how easy it is to apply for a loan online and how fast you can get money when you choose FlexMoney.